Slowing remittances growth raises concerns

The slowing growth of remittances from Filipinos living and working overseas is seen to further widen the current account deficit and put pressure on the peso, London-based Capital Economics said.

Last year, cash remittances rose by only 3.1 percent, the slowest since 2001 and Capital Economics expected the annual growth in the near term remaining at about 3 percent—half the average rate in the last 10 years.

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In a March 14 report titled “Philippines: Is the slowdown in remittances a concern,” Capital Economics senior Asia economist Gareth Leather and Asia economist Alex Holmes said the easing remittances growth reflected the “improved performance of the Philippine economy, which made it easier for people to find employment at home and reduced the need for them to go overseas in search of work.”

The Philippines’ gross domestic product (GDP) has been expanding by more than 6 percent yearly since 2012, among the fastest in the region.

The government nonetheless cut its GDP growth target for this year to 6-7 percent from 7-8 percent previously as the impasse on the 2019 budget dragged on.

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Capital Economics warned about the impact of decelerating remittance growth on the country’s balance of payments position.

“The current account has gone from a surplus to a deficit over the past couple of years and is likely to widen further over the next couple of years. While the main driver of the shift has been a surge in imports of capital goods and raw materials as the government’s infrastructure drive has gathered pace, weaker remittances (which are included as part of the current account) have also been a factor,” it said, referring to the administration’s “Build, Build, Build” program. —BEN DE VERA

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